The changes to off-payroll working rules in the private sector, known as IR35, will go ahead in April 2021 after MPs voted against an amendment to delay them for at least two years.
An amendment to the Finance Bill, put forward by MPs David Davis and Ed Davey, would have delayed the controversial reforms until 2023-24, however MPs defeated the motion yesterday evening (1 July).
IR35 reforms
Originally set to be introduced in April 2020, but delayed as businesses grappled with the coronavirus crisis, the reformed IR35 rules shift the responsibility for determining the tax status of a contractor from the worker to the organisation.
In April a House of Lords committee said the IR35 rules were “riddled with problems” and have not worked properly in their 20-year history. It urged the government to completely rethink the legislation, but it now appeared that this had not been taken on board.
Seb Maley, chief executive at contractor insurance firm Qdos Contractor, said: “Despite concerns raised by a number of MPs, who rightly exposed the flaws of this legislation and made it clear they do not believe changes are necessary, it seems there’s no turning back now.
“The reform is short-sighted and if mismanaged poses a risk not just to contractors but to hiring organisations and recruiters.”
John Bell, a senior partner at insolvency practitioner Clarke Bell, said contractors and the organisations that use them will be bracing themselves for a challenging time ahead.
“The pending legislation is already having a huge impact on the lives and livelihoods of contractors and we have a seen a surge in the number of enquiries from contractors seeking to close down their limited companies as a direct result of the IR35 changes. Covid-19, Brexit and [IR35] combined means that the UK economy is set to suffer immeasurably in the years to come,” he said.
ContractorCalculator CEO Dave Chaplin said: “Moving forward, the market now needs to prepare and, with careful planning, firms have nothing to fear and can hire freelancers compliantly,” he said. “We have already had a dress rehearsal, and many firms and contractors saw what would happen if they did not prepare properly. We now need to work together to avoid a cliff edge scenario.
“Over the next year we will be seeing more clarity from the courts, as binding authorities are released – and these are likely to favour the self-employed and provide a legal bedrock upon which firms can compliantly hire contractors, without fear of later repercussions.”
Workforce planning opportunities on Personnel Today
Browse more workforce planning jobs
3 comments
So when my companies current contract ends and there will be no hiring clients in my area. Will the government cover the accommodation and related costs. We will not be able to work for clients outside of our areas as minimum costs for accommodation alone amount to 300 pounds per week which are currently funded by our companies. So either the client pays or the ill informed hmrc need to refund these costs. This legislation is going to kill the essential mobile work force.. Brilliant good luck.
This whole taxing extra for contractors is pathetic. If IR35 deems a person an employee, then why do we still pay corporation tax ?? Either you’re an employee or you are not. You can’t be both. But now, contractors have to pay employee N.I ( as now deemed an employee ) , also EMPLOYERS N.I ( yes, how can you be an employer and employee !!! but no , this is another trick ), then corporation tax too !! but hold on, you’re not a company any more. Ah yes, you will get fleeced maximally under IR35 . You are an employee, employer and company – so all rules apply to make sure you have minimum income but you still take risks Unlike a normal permanent employee. The effect will be like how te government killed the housing market by raising stamp duty tax – result, less people moving homes, less tax income for government.
Really makes me wonder how out of touch the government is with reality on the ground and who does the math that obviously is not working for anyone.
Whole situation is pathetic.
Then the other reason “we have Not got enough skilled people so let outside staff flood in” – so now the I.T market is flooded and we can not give our own local graduates any work as its all been taken by outside UK companies who dump staff on the market.
Correction – corp tax does not apply but still, the tax applied is so much, you are better off not taking risks and just being a standard permie, less risks, similar income levels.